An Interview with Daniel Feitelberg, University of California, Merced Campus
Public-private partnerships are taking U.S. infrastructure by storm.
As the government faces increased demands of new and improved transportation, education, healthcare, waste management, and more infrastructure projects, agencies are desperate to ensure continued process, development, and economic growth. And they’re looking to the private sector to help them make it happen.
By definition, public-private partnerships (P3s) are contractual arrangements between public agency (federal, state or local) and a private sector entity.
Since the U.S. is still fairly new to this market opportunity, there are still plenty of misconceptions to the benefits and disadvantages sounding P3 relationships. Here to provide insight on conversations surrounding public-private partnerships is Daniel Feitelberg, Vice Chancellor of Planning and Budget for the University of California, Merced Campus.
Daniel Feitelberg joined UC Merced in 2012 to establish the Division of Planning and Budget and launch the 2020 Project. The project will build the second phase of campus, including 1.2 million ft2 of sustainable academic, housing and student life facilities.
The 2020 Project is the largest social infrastructure public-private partnership in the United States, and the first in the higher education sector. With thirteen years of investment banking experience, Feitelberg has served state and local government agencies, including transportation, energy, water, education and healthcare enterprises. He graduated from the University of California, Davis and lives in Burlingame, California.
Feitelberg recently facilitated the group discussion session on Public-Private Partnerships (P3), alongside Adam Shaw, Project Executive (2020 Project) for the University of California, Merced Campus, at the inaugural Construction, Building & Design (CBD) Strategy Meeting in San Francisco.
How have P3s evolved here in the U.S. in recent years, and how have they affected the construction industry?
The P3 industry in the United States evolved primarily in the transportation industry through toll roads, tunnel projects and the like, and has later come into the public building space.
In the United States, so far, there have been 3 pure public-private partnerships in the public building space all in California: The Long Beach Courthouse, the Civic Center in Long Beach, and the Merced Project. There have been a very large number of lease specs, and other property rights transactions with public agencies that have fallen under the P3 rubric, but the concession model, which is what’s emerging in the public building space, is relatively new in the past few years.
Talk a bit about your experience on the Merced Project.
UC Merced, the newest campus on the University of California opened in 2005, built out its first phase over a period of 10 years. The state of California had utilized its traditional financing programs, some financed by the University of California, to build out about 1.3 million square feet of student classrooms, research laboratory, library, housing, dining, etc.
The second phase essentially doubles the size of the campus, builds 1.2 million square feet, and will do so (construction began last fall) by 2020. We ran a planning process that began in 2013, so in total about 7 years from the beginning of planning to the end of construction.
Visit the Merced 2020 Project on the University of California, Merced website for more information and details on this project.
What are the benefits of forming P3s?
A few things, it allows the public owner to focus its planning process on all life cycle costs; so not just the design, construction, and financing (which is often done up front), but also the long-term operations and maintenance of the facilities. It also allows for the understanding of what the total cost of ownership will be and building that into its financial models and budget process so it can be certain about long-term financial sustainability.
In addition, when focusing more on the long-term performance of the buildings and the long-term maintenance, it allows for a focus on the performance standards of the buildings; rather than building into the contract performance standards and allowing the private industry to develop the buildings based upon how it will achieve those standards.
Whether those be sustainability standards, the University would get out of the role of picking the technology to achieve our sustainability standards, but leave that responsibility to the private sector once its established what those standards should be.
It allows us to think about what the utility of our facilities are providing on a life cycle cost, but then refocus on what our public mission is, which is the public service through teaching and research.
So what were you say are some disadvantages or challenges?
The disadvantages become project-specific. P3s are useful at present for certain types of projects. One, the market is so new that there are large international consortiums that will come together for large and complex projects. A typical one-building project, or something that’s in the middle of a campus, may not be the best candidate for that now.
Some will see this next one as a disadvantage and some won’t, is that the planning process, by its nature, needs to be much longer. And we need to be thinking about how to develop performance standards, which are very hard when public aid is just use to delivering technical specifications.
It’s harder to step back and change your mindset into more outcomes-based approaches. It changes the decisions that the public architects and engineers need to make, so they’re not thinking about technology, but they need to think deeply about the functionality of the building. Again, that can be hard and take a lot of time.
The other disadvantage that some have talked about is it takes away the public’s flexibility to defer maintenance. Now one of the major problems that P3 is solving is that it’s providing for the long-term maintenance. That’s a big positive, not getting deferred maintenance. But some would say you are prioritizing the maintenance of the buildings over the service going on inside in a difficult economic environment. But it’s also exactly that which has cause the large deferred maintenance backlogs we have today.
What would you say is essential for these P3 relationships to function effectively?
A high-quality, well thought-through planning and procurement process where sufficient time is allowed for the public owner to have confidence not only in the standards building into that process, but also gaining confidence that the building is going to get what its intending to buy through the process.
That requires thoughtful methods that allows the public owner to understand how the industry is responding to its performance standards through the process.
What can you and your peers learn from each other here at the CBD Strategy Meeting to help drive the conversations that are surrounding the P3 process?
I think a shared knowledge of each other’s roles and obligations in this type of contract. Recognizing that all these contracts are ultimately customized to particular projects, the particular owner’s needs, and that itself is a process.
I think also sharing some of the lessons learned, and where the change of mindset needs to occur. The challenges of developing performance specifications are also related to the advice that the public owner gets from its architectural consultant. It’s changing a bit in this process than it would in a traditional design build project.
Key takeaways from your group discussion session at the CBD Strategy Meeting?
A shared understanding of why this would valuable in the public owner, but also the recognition of the concerns about risk that the subcontractors have. When they are participating in a consortium environment versus some of the traditional ways that governments have procured buildings, sharing those lessons learned through larger complex projects will ultimately enhance everybody’s understanding and means for these projects to evolve.
Find more info on the next CBD Strategy Meeting on April 19, 2018 in Dallas, TX here on our website, and view photos and testimonials from the 2017 event!